Report clears the way for Marinus Link cable between Victoria and Tasmania despite cost blowout

The Marinus undersea electricity cable is in the public interest despite cost increases, according to a report by EY and FTI Consulting which clears the development pathway.

The planned route of the Marinus Link sub-sea cable.

The Marinus Link electricity project is in the public interest despite rising costs, an independent audit has found.

This paves the way for construction of the undersea cable connecting Tasmania and Victoria to proceed under the federal government’s $20bn transmission overhaul.

The project has been earmarked as critical by the Australian Energy Market Operator if the nation is to meet its ambitious shift towards renewable energy, but required an assessment before it could be approved to proceed.

Consultancy firms EY and FTI Consulting concluded the project would cut electricity bills in both states and deliver more than $1bn in emissions savings, despite sharp increases in costs for key infrastructure.

The report found households in Tasmania would be $113 better off each year once the link was operational, while Victorian customers could expect annual savings of about $68. The assessment put emissions reductions at $1.06bn in avoided costs.

The findings will allow the progression of the project after months of uncertainty surrounding the 345km cable, which includes a 255km section across Bass Strait and a further 90km buried through Victoria’s Gippsland region.

The cost of the cable has crept up to $3.89bn – a $30m increase on previous estimates. But the biggest blowout has occurred in the associated overland transmission infrastructure in Tasmania. The North West Transmission Developments project is now expected to cost $1.14bn which is a $200m increase on previous estimates.

The federal government, which has committed $20bn through its Rewiring the Nation program to fast track high-voltage transmission upgrades, has pledged to support the project.

The Marinus Link has had a rocky path to approval. In mid-2023, Tasmanian Premier Jeremy Rockliff threatened to walk away from the project entirely on the basis that there had been a “material and significant increase” in costs and that the state could no longer justify its equity commitment.

A revised agreement brokered late last year rescued the project, when the federal government stepped in with Victoria to absorb a greater share of the risk. Under the new structure, Tasmania’s stake in the project was reduced from 33 per cent to 17.7 per cent, and the state will have the option to divest its equity to the Commonwealth once the link is commissioned.

Originally envisioned as a pair of 750MW undersea cables connecting Tasmania’s northwest to Victoria’s Latrobe Valley, the Marinus Link is expected to improve the reliability of the national electricity market by allowing surplus hydroelectric and wind power from Tasmania to be exported during peak demand on the mainland.